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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI AMARJIT SINGH, JM
O R D E R
PER AMARJIT SINGH, JM:
The revenue has filed the present appeal against the order dated 15.11.2019 passed by the Commissioner of Income Tax (Appeals) -02 Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2013- 14.
The revenue has raised the following grounds: - " 1. Whether on the facts and under the circumstances of the case and in law, the Hon’ble CIT(A) was justified in treating the lease rental income of Rs.9,22,22,450/- as income from house property of business income.?"
3. The brief facts of the case are that the assessee filed its return of income on 30.11.2013 declaring a total business loss to the tune of Rs.30,21,59,041/- for the A.Y.2013-14. The return was processed u/s 143(1) of the Act. The case was selected for scrutiny. Notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. The assessee is engage in the business of property development and construction The assessee received a sum of Rs.9,22,22,450/- as rent from letting out of premises owned by its and shown as business income. The AO was not satisfied and the said lease rent was treated as income from house property and accordingly standard deduction @ 30% was given and the total loss assessed to the tune of Rs. (-)23,06,78,521/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who treated the said income as income from business but the revenue was not satisfied, therefore, filed the present appeal before us.
ISSUE NO.1 4. The only issue which has been raised by revenue is that the lease rental income of Rs.9,22,22,450/- should be treated as income from house property. Before going further, we deem it necessary to advert the finding of the CIT(A) on record:-
5. 1 have considered the AO's order, appellant's submissions and details filed. I find that the similar issue had arisen in AY 2012-13, wherein the appellant had declared the lease rental income as Income from Business" and the AO had assessed such income as Income from other sources" and had disallowed the claim of depreciation, interest etc. I find that the CIT(Appeals)-2, Mumbai, vide order dated 20.04.2016 in Appeal No. CIT(A)2/IT/260/2014-15, has decided the issue by holding the said rental income as Income from Business" by making the following observations:
3.3. The Appellant is in the business of construction and development of property and is in possession of finished units in a LT. Park situated in the Suburb of Andheri, Mumbai. This park was a notified park in the hands of Ackruti City Limited from whom the same is purchased by the appellant. The benefit of the deduction u/s 8OI4(4)(iii) is however not passed on to the appellant. The Appellant has been consistently claiming the lease income received from the units in its possession as its Business Income" which has been accepted by the department vide assessments completed u/s 143(3) of the Act for earlier A. Y. 2020-11 & 2012-12.
3.4. 1 have further gone through the Memorandum and articles of association (MOA) which covers a number of businesses covered by a builder Company. The main objects of the said MOA states as under; "To carry the business of contractors, Promoters, developers. builders and construction and maintenance contractors, architects, RCC consultants and developers of land, Plot, resorts, farm house, residential premises (including blocks, flats, apartments, bungalows. row house, chant, hutments), commercial and industrial premises (including industrial estate, factories, workshops, godowns , warehouse ,hotels ,stores ,offices , chops. showrooms. places of sports, entertainment, hospitals garages) dams, reservoirs , wells canals , tanks , compounds, infrastructure projects , walls , roads streets , bridges , tunnels, flyovers , offshore platforms , ports terminals, highways, paths streets ,sideways, structures temporary or permanent and to undertake preparation and development of drawing , designs . layouts, and to make contracts, agreements at various levels including central government, Semi- Government, state Government Municipal and Gram panchayat and of local authorities and private parties, corporate bodies, co-operative societies or any statutory authority and to act as government contractors and real estate agents and consultants."
3.5. The above clearly brings out the scope of the business, which the Company is permitted to do as its business. Presently, a glance at the appellants financials and disclosures abundantly show that the appellant has no income other than lease income received from units held by it. The units are finished and leashed properties which are disclosed under "current Investments" because the same is mandated by the new Schedule VI of the Companies Act which requires leased premises to be disclosed as such. However, the same are considered as inventories by the appellant Company as in support of which disclosure are made in accounting policy no 5 of the financials of the Company, where the presentation as well as the facts are given. I also find that the AO has also himself admitted that the units held by the Company are in the nature of "stock in trade". The AO has also infact directed that interest expense be capitalized to the cost of the "stock" which implicitly points to AO also considers the activities of the appellant as its business activity.
3.6. It is also seen that the units possessed and owned by the appellant are in an industrial Park which was originally notified by the board vide Notification no. 29/2006 F.No 178/58/ 2005-1TA-1 dt. 05.06.2006 in the name of Akruti City Ltd being the Developer of the Project which was claiming the said income as its "Business Income" which is also accepted by the department. The department has accepted that the running and maintain the infrastructure facility is business income in the case of Ackruti City Limited, the original owner of the units.
3.7. Appellant has further relied on the following judicial precedents:
"The Hon'ble ITAT Mumbai Bench A in Krishna Land Developers (P.) Ltd. V Assistant Commissioner of Income-tax, Circle-2(2), Mumbai [2013] 32 taxmann.com 325 (Mumbai - Trib.) has ruled that Rental income derived by assessee from business center if Park) was to be treated as business income and not as income from house property.
The ITAT Bangalore Bench in Global Tech Park (P.) Ltd. v. Assistant Commissioner of Income-tax, [2009] 28 SOT 45 (BANG.)(URO) has observed that the term 'business', as defined in the provision of infrastructure facility as provided in sub- clause (iv) of section 80-1A clearly explains the development and operation of the technology park and it was not controverted by the authorities below. The main intention of the assessee was to exploit the immovable property by way of commercial application. Any activity undertaken with a profit motive would amount to business and not merely a return on investment when it is exploited. Accordingly, the Assessing Officer was to be directed to assess the income earned by the assessee under the head 'Income from business'.
3.8. I find that the lease rental income received by the appellant is germane to its business activities. The same is income received till the disposal of the units in possession of the appellant Company and has to be considered as its business for the purpose of disclosure of income.
3.9. 1 also find that the appellant has been consistently been offering lease income as its "business income", which is also accepted by the department in assessments completed u/ s 143(3) of the Act in its earlier assessment years 2010-11 as well as 2011-12.
3.10. Respectfully following the decision of Hon’ble I7'A7', Mumbai in the case of Krishna Land Developers (P.) Ltd. V ACIT", Cir.2(2), Mumbai, I am of the considered opinion that the Income from Business Centre is 'Income from Business' and hence the appeal is allowed."
5.1. I find that similar finding has been given for A.Y. 2010-11 vide order of CIT(A)-2, Mumbai dated 12.04.2017 in appeal against the order passed by DC1T-1(1), Mumbai u/s.143(3) rws 263 of the Act dated 16.03.2016, following the earlier order for A.Y. 2012-13. In the A.Y. 2010-11, the AO had assessed the "Income from House Property and in the said order dated 12.04.2017, the CIT(Appeals)-2 has held the same to be Income from Business". Since the facts of the case remains the same for A.Y. 2013-14. -7, following the decision of the C1T(A)-2, Mumbai for A.Y. 2012-13 and A.Y. 2010- 11, as noted above, it is held that the AO is not justified in assessing the rent receipts of Rs.922,22,450/- as income under the head "Income from House Property" and further disallowing the claim of various Business expenses debited to the Profit & Loss Account. The AO is directed to assess the rent receipts of Rs. 9,22,22,450/- as income under the head "Income from Business, Profession" and re-compute the total income as per the provisions of the Act. The AO will allow relief accordingly. Ground Nos. 1, 2 & 3 are allowed.”
On appraisal of the above said finding, we noticed that the CIT(A) has allowed the claim of the assessee on the basis of the earlier decision for the A.Y.2012-13 decided by CIT(A) by virtue of order dated 20.04.2016 in Appeal No.CIT(A)-2/IT/260/2014-15. The relevant finding has been reproduced in the order mentioned above. Subsequently, the matter of controversy came before the Hon’ble ITAT and the Hon’ble ITAT has decided the matter of controversy by virtue of order dated 08.05.2019 in for the A.Y.2012-13 in which the rental income has been treated as business income. The issue is now squarely covered by the decision of the Hon’ble ITAT in the assessee’s own case bearing ITA. No. 2499/Mum/2017 for the A.Y.2012-13 dated 08.05.2019, therefore, we
CIT(A) in quite correct which is not liable to be interfere with at this appellate stage. Accordingly, this issue is being decided in favour of the assessee against the revenue.